VOX POPULI
by
S Kamat
as
Aam Admi
Issue: 193
Date: 20.03.2017
Contents:
1. Need To BeTough to Resolve NPA's & Clean Up
Our Banking System
2.
Development Is The New
Currency for Our Politicians
3. The Congress Was Sleeping In Goa
4. Democracy Under Threat In India
Need To BeTough to Resolve NPA's & Clean Up Our Banking System
We are back again talking about the huge NPA's at our scheduled
banks and what to do about them. One of the methods has been to suggest that
creating a 'bad bank' would help concentrate the recovery process and generate
a special expertise in dealing with these huge unrecoverable loans. This is
essentially a bad idea since you are letting those who had sanctioned
these loans within the existing banking system off the hook. These people
should be made accountable irrespective of the fact that some may have
retired. Moreover the very idea of creating a 'bad bank' will have many
applicants to staff it since the corridors of that institution will be paved
with gold allowing easy money to be made. Thus it is best that each bank
be responsible for the NPA's they have generated and find a solution to
the problem within the normal ambit of their operations. This resolution method
being decentralised will make for more time bound action and also ensure that
they are tackled properly and speedily disposed since the concerned bank will
have better knowledge of the defaulter. This should work as long as the bank
management is empowered with adequate powers to deal with the loans. The
known fact that the top corporates account for more than 80% of the NPA's has
been admitted by the government which augurs well for the resolution of these
bad loans since the defaulters are recognisable and known.
Arun Jaitley, our esteemed Finance Minister has been talking about
these NPA's suggesting that global conditions and market downturns were
responsible for their creation. Are these not normal conditions for operating
businesses? Were the management not privy to the risks that they were taking?
So when the risks did not pan out on the positive side why are the banks being
made to hold the can? The management at these Cos. should pay as also if any of
the banking officials who had connived to sanction these loans. For those of us
have been in top management in business we all know how difficult it is to raise
money for projects particularly when bank consortiums are involved. If so then
how were the NPA's able to obtain money from these consortiums when surely
each bank in the consortium knew the borrower was stretched to the limit and
tending towards default? That is precisely how Vijay Mallya hoodwinked the
banks to generate his NPA's that now amount in excess of Rs. 8000 crores.
Another aspect here is that the banks are expected to hypothecate properties to
equivalent levels to that of loans disbursed. Every individual in this country
knows how cumbersome and tedious the hypothecation procedure for assets and
property is but how is it that big industrial groups manage to hypothecate
assets so quickly and more importantly get loans far in excess of the sale or
book value of the assets. This is proved by the fact that 3 times has SBI tried
to sell properties of Vijay Mallya in Mumbai and Goa including houses,
buildings, planes and cars but all three times they have been unsuccessful
despite reducing the prices in each successive round with no takers. Thus were
prices of these assets deliberately inflated and with connivance to justify the
amount of loans that were sanctioned? These matters need to be investigated and
the truth brought out since each and every NPA that constitutes the burden of
Rs. 800,000 crores with the scheduled banks today will have a similar story to
tell albeit with variations.
In this context one does not understand why the
Finance Minister is playing soft with the banking system and their officials
firstly in allowing things to drag since 2014 by encouraging the argument put
forward by bank officials to give them protection from the Anti Corruption Act
since any concession shown to the defaulters may be interpreted as being given
for a consideration. You see how rotten the system is, the bank officials get
bribes for sanctioning loans, then no action is taken against them for delaying
recovery and thereafter they have the audacity to seek protection by law for
what they will take to resolve the loans. Secondly, the banks have been writing
off each quarter a portion of their NPA's for the last two years and more.
Considering these NPA's are mostly attributed to the well-heeled, the rich
and the powerful, Mrs Arundhati Bhattacharya, CMD of SBI will have to answer
why the principle of the banking credit system is not compromised in these
cases but it does get compromised when farmer's loans are written off. She
has famously said that farmers once their current loans are written off will never
pay the next loans they take but will wait until the next loan waiver mela
takes place. Is this not the same with trade and industry who seek
re-scheduling of their loans and wait for one-time settlement schemes to be
announced by the government or the banks either sector-specific or across the
board? Why are we making the poor farmer the culprit when everybody in the
system is tainted starting from the politicians, ministers, the government
bureaucracy, the banking system, industry and trade and even common
individuals. This is India, Madam and jugaad is the way of
life and as long as you do not get caught everything is fine!
As for farmer loan waivals, do it on a region
basis where drought or common reasons have really affected harvests and made
the loans go bad, so that the farmers are not needlessly left at the mercy of
loan sharks to whom they may have to go to pay off the bank loans. The last
time this was done for some Rs. 60,000 crores, Sharad Pawar was the Agriculture
Minister and he made sure that the small farmers could not get anywhere near
the loan waiver but his constituency of farmers with larger holdings benefited.
At that time it was seen that the banks had not been very co-operative in
entertaining farmers who came in for
loan waivals. Thus this time around if the loan waiver scheme comes into being
then the banks need be instructed to be more pro-active in clearing the
loans. It is being commonly said that Narendra Modi has captured the mind
space of the poor at the present what with his saying that every India will get
Rs. 15 Lakhs after all the black money is brought back but that never happened.
After the demonetization exercise he has said that Rs. 25,000 will be credited
to each BPL or Jan Dhan account, one does not know which, and even that has not
happened. Thus one is not in favour of such obvious gifts to our poor or
farmers since that will not motivate them to strive harder. Instead of that
what should be done is to provide them proper inputs for their work at
competitive rates, waive off loans if it has got affected because of natural
causes, streamline the system that they operate in be it the input suppliers,
the banking system or the marketing agencies that finally sell their produce or
products. This will encourage the poor to contribute more productively and pull
themselves out of the poverty situation. But the present tendency is to go
overboard on both extremes while dealing with them like give them some money
and shut them up or like the SBI CMD asking them not to seek any concessions.
In India close to 40% of the population hovers around the poverty line and we
cannot afford to ignore them. If that Bharat improves, it will also give a
boost to the rich, corporate and well-heeled India that has this tendency to
ape the West.
Thus it is suggested that the NPA's be resolved at the banks
where these were generated, action be intimated against banking officials if
they are found complicit with out of the way sanction of loans which infringe
the bank's guidelines, have the RBI Oversight Committee meet regularly and be
given sufficient teeth to drive the banks to resolve the NPA's in a
pecific time-bound manner. Wherever assets need be seized and/or auctioned from
industry, big corporates or otherwise, get this done and if found necessary
launch disproportionate asset cases against at least one top head honcho of
banks, to set an example and send the message across to the banking system that
the time to cosy up with their borrowers is over. This is what Jaitley has to
get Narendra Modi to do so that the banking system is cleansed once and for all
of the NPA's which by some estimates is expected to reached Rs. 15 lakh
crores by end of this month, 31st March 2017, inclusive of interest and
charges.
Development Is The New Currency for Our Politicians
Narendra Modi has been harping on the plank of
development during election times which is the new currency for our
politicians. The more the development the more they are able to feather their
nests. As for development, mind you no one is against it as long as
it is relevant and sustainable but that is not the way the cookie crumbles when
projects are taken up. Right now the number of crorepatis dominate the
political spectrum among candidates filing their returns with the Election
Commission. The recently elected 40 MLA’s to the Goa Assembly all have assets
in excess of 1 crore. In another few years you will find them filing asset
returns in hundreds of crores which will remain unquestioned by the authorities
or no investigations launched as to how they got these increase in assets. This
is where just like the NOTA option is being put on the EVM's now, we should
evolve a methodology of giving the voters a right to recall their elected
legislators. A legislator should be asked to give up his seat for known reasons
of corruption, lack of performance, health reasons or any other as determined
by more than 50% of the voters in his constituency. This could start as an
annual review through the EVM's and progressively move up to computer
terminals in each locality of the constituency as our IT technology advances
when the period of review could be made smaller like every 6 months. This kind
of a system will at the least instill the sense of responsibility in our
legislators towards their constituencies on a more definite basis. The AAP
for all its faults started this process of obtaining feedback from the people
for its major policies or initiatives which has been a good thing and our
government could examine whether asking this initiative forward.
A point relating to the BJP hijacking the public
mandate in both Goa and Manipur which gave a larger number of seats to the
Congress shows how flawed our democratic system is. The people gave a verdict
but now a curtain is drawn upon them saying your act is over and it is our, the
politicians, turn now. We will overturn the mandate and not entertain and
tolerate any opinion from you the people. We have seen this behaviour of our
politicians and their political parties at other times also where once
elected they do what they like and not what people like. This done in most
cases for 4 years of the 5 year term they act without caring for the electorate
and then in the last year they go around sometimes patching up on promises made
to the people so that they are given yet another 5 year term. This is a rather
sad state of affairs for democracy in India and hence the Right To Recall
Option (RTRO).
The Congress Was Sleeping In Goa
The Goa Assembly elections 2017 have been
reduced to a farce. The Congress winning the largest number of seats must have
come as a shock to the party itself and in the trauma thereafter the party went
into somnolent euphoria with the top local leadership debating more who would
be the Chief Minister rather than concentrating on the task of forming a
government. The urgent need to get those 4 MLA's to cobble out a majority was
somewhat missed and that is where Manohar Parrikar and the BJP, not the ones to
miss out on an opportunity pulled the rug from under the Congress party's feet.
There is no point in blaming the Congress leadership in Delhi or their
representative, Digvijay Singh since it was the local leadership that should
have seized the moment and driven the matter since they are more aware of local
conditions and allegiances. But the problem with the local Congress leadership
was that they had lost self-belief and did not even have a plan in the event of
a development like a hung verdict leaving them as the single largest party.
They had convinced themselves that they were losing. This is the sad story of
the Congress who have watched from the sidelines as the verdict of the
elections was hijacked by the BJP. All this going
to the Supreme Court and getting a ruling for Manohar Parrikar and the BJP to
prove their majority on the floor of the house on Thursday, 16th March is part
of the farce being played out as said earlier and in the nature of damage
control to recover their public image in the eyes of the voting public. When Manohar Parrikar could parade his 21 MLA's
and submit letters of support to that effect on Sunday, 12th March, what stops
him from winning the vote of confidence on 16th March? The Congress has been at
fault at this time and they should admit as much.
Democracy Under Threat In India
Modi has gone overboard
to correct the image of the recent Assembly election results that he lost 3 out
of the 5 States that went to the polls by drastic action in overturning the
public mandate in Goa and Manipur and claiming that the BJP can form governments
in these 2 States. Though there are some who have said that Modi
& the BJP have taken UP with a landslide win,
which has more seats than all the other States put together. But in my opinion
the true test of leadership is its spread and not its depth. Winning just
UP also shows the single mindedness of Modi which is not necessarily a good
thing in statesmanship since you have to look after everyone. It can be
presumed from this that he can maybe do only one thing at a time which for a
child is a good virtue but for a Prime Minister a bad weakness. The seriousness of Modi’s purpose in overturning the public mandate in Goa can be
gauged by the fact that he was willing to let go his Defence Minister, Manohar
Parrikar, whom just a few weeks ago he had called a 'navaratna' of his Cabinet.
Forget that since Modi will tell you that most of the time he does not mean
what he says and in any case Parrikar was more than homesick for Goa. But what
the BJP has done is to undermine democracy and its due process by cancelling
the verdict of the elections which gave the Congress party the highest number
of seats in both Goa and Manipur. The role of the Governors in the 2 States is
in question since they have acted against the basic principle of elections in a
democracy and that is to first give opportunity to the party which has secured
the largest number of seats. Only if the largest party expresses inability then
the next party has to be called to form the government. There is no matter in
quoting precedents and the assessment aspect in the satisfaction of the
Governor as to who can provide a stable government, since the latter is after
the fact. Thus both the Governors of Goa and Manipur who are BJP government
appointees have not discharged their office as required under the Constitution
and in the interests of democracy and hence they should voluntarily quit office
or be discharged from their duties by the President. On a broader aspect it
needs to be said that all the finer points of derailing the edifice of
democracy anywhere in the world has emerged in India. Whether it is using money
to bribe voters in elections, cultivating dedicated vote banks by segmenting
the voters on religion,
caste or any other basis, organising defections, suborning the results
of elections as covered above, horse trading, using money power
in elections etc. etc, happens only in India. Thus the democracy in India
stands totteringly, propped up by bandages and bandaids of this rule, that
amendment or yet another court judgment, tired, dejected and remorseful and
praying that it is put out of its misery as early as possible. At the same time
our politicians continue to threaten voters with the sanctity of democracy to
which they just pay lip service to make it work for their own selfish interests
and with no desire or intention to pursue a truly functional democracy.
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